Mergers & Acquisitions

Johnson & Johnson Borrows $7.5B to Fund Its Purchase Of Momenta

S&P Global Ratings said that the company’s adjusted debt to a measure of earnings is at a 15-year high.
Vincent RyanAugust 21, 2020
Johnson & Johnson Borrows $7.5B to Fund Its Purchase Of Momenta

Johnson & Johnson is borrowing $7.5 billion in bonds to help fund its purchase of Momenta Pharmaceuticals,  as a series of companies tap the debt market to finance merger and acquisitions, Bloomberg reported Thursday.

What Happened

The multinational drugmaker sold debt in six parts to fund its purchase of Momenta, with the longest — a 40-year note — yielding 110 basis points over Treasuries. The paper was earlier discussed at 125 basis points.

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Other companies that have raised funds through bond issues to fund M&A activities in recent days include Intercontinental Exchange, Roper Technologies, and a KKR & Co. unit.

The New Jersey-based company enjoys a pristine AAA credit rating and is raising capital through the debt markets for the first time in three years.

The offering achieved record-low yields, also observed in the recent offering of Alphabet.

Why It Matters

Johnson & Johnson announced this week it would acquire Momenta, in a deal valued at $6.5 billion, by the second half of 2020.

The higher leverage incurred to fund the purchase is expected to affect the pharmaceutical giant’s ability to pay for liabilities arising from litigation related to the talc and opioid cases, according to Moody’s Investors Service.

S&P Global Ratings reportedly said that the company’s adjusted debt to a measure of earnings is at a 15-year high.

Johnson & Johnson shares closed nearly 0.7% higher at $151.42 on Thursday and gained another 0.2% in the after-hours session.

This story originally appeared on Benzinga.

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